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Milk Producers Predict Price Drop

March 5, 1999

WASHINGTON (AP) _ Milk producers enjoying record-high prices will experience a sharp drop over the next month _ the largest change in one month in history, the government said Friday.

It’s good news for consumers who should see a decline in the prices of milk, cheese, butter and other dairy products, economists say.

The Agriculture Department said the basic milk price received by producers will drop from $16.27 per hundred pounds of milk to $10.27. The government determines the price each month by surveying manufacturers about the price paid to producers, then announcing the figure as a guideline for the industry.

The largest month-to-month decline ever recorded was a $2.52 dip, said Chris Nubern, an economist with the National Milk Producers Federation.

The upcoming price decline is earlier than normal. Prices paid to producers usually drop in the summer when it’s hotter and milk production declines.

``Those are some very low prices for dairy farmers,″ Nubern said. ``Ten dollar milk is not very profitable for dairy farmers.″

``Everyone across the country is going to feel some of the price decline in some shape or form,″ he said.

Nubern said the dip is partly due to increased production prompted by record prices: ``We’re in a market where a lot of milk is being produced and that’s driving prices down.″

Despite the size of the drop, the price will not reach the lowest level dairy farmers have seen. In February 1991, for instance, prices were at $10.04, Nubern said.

Producers also have a cushion waiting for them. Congress included $200 million for dairy producers in last year’s emergency farm aid package. Agriculture Secretary Dan Glickman is still deciding how to distribute the money.

The drop comes after a record year where _ despite low prices for producers in other sectors _ milk producers received extremely high prices.

Producers were getting about $10.88 in May of last year, but prices jumped to $17.34 by December. Consumers saw the price of milk and dairy products rise.

The average retail price of a gallon of whole milk in January was $2.94, compared with $2.63 a year ago, said Annette Clausson, a USDA economist. Butter was $3 a pound in January compared with $2.35 a pound a year ago.

``We’re expecting that retail prices for milk and other dairy products will start coming down midsummer,″ Clausson said.

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